SPECIAL UTILITY COMMITTEE
A Special Utility Committee Meeting was held on November 10, 2003, at 5:30 p.m. with Chairman Ruane presiding. Members present were Mr. Carey, Mr. Lambert, and Mr. Ritter. Mr. Farling was absent. Members of Council present were Mr. Pitts, Mr. Salters, and Mr. Truitt.
Agenda Additions/Deletions
Mr. Carey moved for approval of the agenda, seconded by Mr. Ritter and unanimously carried.
Presentation - Scope of Work - Water Master Plan (Engineering Services Agreement)
Mr. Koenig stated that the Department of Public Works had requested authorization through the CIP and budget process to prepare an updated Water System Master Plan for the City of Dover. A Request For Proposals (RFP) was conducted and six (6) written proposals were received. After interviewing all six (6) consultants, Whitman, Requardt & Associates was chosen. The Water System Master Plan will address the following required services:
Facilities Condition Evaluation Estimate Costs
Impact of Regulations Implementable CIP
System Analysis/Water Modeling Impact of CIP on Rates
Identify Improvements
A presentation on the scope of work and the expectations of the 2003-2004 Water Master Plan for the City of Dover (Attachment #1) was given by Mr. James A. Avirett and Mr. Andrew Cooper (Whitman, Requardt & Associates). The Master Plan will identify and address a number of issues related to the production, transmission, security, and development of the City’s water system. Members were also provided a copy of the following: 1) Benefit memorandum; 2) Draft Engineering Services Agreement and Scope of Work; 3) the 1986 Water Master Plan summary; and 4) the RFP issued by the Department of Public Works.
Mr. Avirett indicated that a calibrated water model and modeling software package would be provided to the City for use by City engineers, operators, and planners. The software will be completely owned and operated by the City of Dover. Whitman, Requardt & Associates will provide software training to City personnel.
Mr. Ritter questioned why the City combines the different aquifers into one (1) system. Mr. Koenig explained that three (3) different aquifers (Piney Point, Cheswold, and Columbia) are used to supply Dover’s water; however, none of the aquifers, independently, can sustain Dover’s water demand.
In response to Mr. Ruane, Mr. Koenig assured members that they will be given updates on the Water System Master Plan during its development, similar to the manner in which the Electric Rate Study was handled.
Mr. Ritter relayed concerns regarding the City’s brown water problem and suggested that when the proposal is submitted to Council for approval, it include an alternate to provide for a chemical analysis. Due to time constraints in keeping this project on track, Mr. Koenig requested that if a chemical analysis is desired, it be accomplished by an addendum.
Mr. Avirett advised members that problems with brown water are not unique to the City of Dover. He explained that the problem may need to be resolved through a series of corrective measures. As the study progresses, a more accurate analysis will be accomplished and the exact causes of the problem will be known, at which time solutions could be developed.
Mr. Koenig explained that this project is still in a draft stage and that staff has been negotiating the costs for the Engineering Services Agreement with Whitman, Requardt & Associates. This Agreement is planned to be presented to Council for approval during the latter part of this month. He stated that the methodology of addressing those concerns of brown water could be brought back to members within a month after approval.
At the suggestion of Mr. Ruane, Mr. Koenig stated that if the information to address the brown water problems is not available for presentation during the next Council meeting, they will attempt to make them available during the committee meeting in January 2004. Mr. Koenig explained that Whitman Requardt & Associates has indicated that if an alternate scope of work to include a chemical analysis is chosen at this time, it may be more extensive than what is necessary to correct the problem. It will not be known what the City actually needs to resolve the brown water problems until at least 30 days after work begins on the Master Plan, which will allow the engineers to begin assessing the City’s water system.
No further action was taken.
Cost Sharing Proposal and Evaluation Bids - West Dover Water Loop (Materials Only)
As detailed in the FY 2004 Operating Budget and Capital Investments Program, the Department of Public Works has proposed to extend a twelve inch (12") water distribution main from the Cranberry Run Subdivision entrance on Route 8 to the intersection of Route 8 and Artis Drive.
It was noted that the Calvary Baptist Church submitted a request for water service to their 76-acre parcel located at the intersection of Artis Drive and Route 8. The estimated water usage for the proposed facility is 12,000 gallons per day (GPD). The Calvary Baptist Church has expressed an interest in entering into a Cost Sharing Agreement with the City of Dover to construct the improvements. A formal agreement would be executed by officers of the church and the City Manager. Initially, the estimated cost sharing amount for the church to contribute was $75,000; however, since the church has agreed to dedicate a utility easement across the front of their property, the cost sharing amount has been reduced to $50,000.
The West Dover Water Loop Project would provide water to areas currently outside of the city limits, some of which have expressed interest in receiving water service from the City of Dover. This approval is for water main materials only; the City’s construction crews will provide the necessary equipment and labor to construct the water main. There will be additional costs for traffic control, jack and boring of Route 8, and other routine costs associated with utility construction.
Sealed bids were submitted and, although they were not the low bidder, staff recommended awarding the bid to Dover Pluming Supply using “local vendor preference” in the City’s Purchasing Policy. There was less than a 1% difference in the overall bid. Supplies for our “construction in progress” are purchased from Dover Plumbing Supply due to the proximity of their location to City job sites. In addition, Dover Plumbing Supply has worked diligently with our crews to stagger delivery of materials which minimizes the need to store materials.
Funding for the West Dover Water Loop (materials only) is available in the Water Fund - Page 131 of the 2004 Draft Operating Budget (Line Item #40-42).
Responding to Mr. Lambert’s concerns relating to the cost effectiveness of constructing the West Dover Water Loop, Mr. DePrima stated that this area was reviewed for possible annexation. Mr. Koenig explained that when the City conceived the West Dover Water Loop, the church property was a subdivision application at the County, to consists of approximately 150 houses with on-site septics and public water. The farm adjacent to this property was also marketed as residential; therefore, a substantial number of homes were anticipated for this area. The church has since purchased the property and changed the concept of a subdivision to being more of a village concept. Mr. Koenig stated that there were two (2) considerations for this project: 1) growth in the City of Dover during the past 20 years has been predominantly to the west, therefore, this project would be a natural progression; and 2) franchise protection since the City would not want other water suppliers driving a well, thus eliminating the City from expanding to the west. Although there is a potential risk for the City, it was felt that this project was worth the risk.
Mr. Lambert moved to recommend awarding the bid for the West Dover Water Loop (Materials Only) to Dover Plumbing Supply, Dover, Delaware, in the amount of $89,943.46, contingent upon obtaining the cost sharing agreement with the Calvary Baptist Church ($50,000 cash and a utility easement across the front of their property), as recommend by staff. The motion was seconded by Mr. Carey and unanimously carried.
City’s Position on Controlling Electric Generating Capacity in the Future
The City’s D/FD Contract Negotiating Team (Mrs. Mitchell, Mr. Blakeman, and Mr. Betts) is seeking acknowledgment from City Council that it wants the City to continue controlling and preferably owning enough generating capacity to meet the City’s future needs. The negotiating team finds itself in a considerably different position now than it was in 1995. At that time, McKee Run Generating Units 1 and 2, which generate 17 MW each, were already in poor condition. Now, eight (8) years later, their reliability is even more tenuous. These units were constructed in 1961 and 1962 and are at the end of their useful lives. Dover’s peak demand, meanwhile, has grown to 171 MW while the system only has 175 MW of generating capacity, including Units 1 and 2. Annual system peak demand is growing by about 5 MW per year.
D/FD currently buys capacity on the open market to meet Dover’s PJM peak capacity pool-wide reserve requirement of approximately 8% in 2003, however, the installed reserve margin is 19%. Under our current contract, this expense is borne by Duke and does not affect the cost of energy to the City. Duke also assumes the risk for replacing the capacity from Units 1 and 2 from the PJM capacity market. However, the contract requires D/FD to maintain and return the units in working order at the end of the contract period, subject to normal wear and tear.
Given the age and condition of Units 1 and 2, and assuming Dover’s load continues to grow, the amount of generating capacity that would have to be purchased on the open market will increase by 34 to 50+ megawatts. Under these conditions, D/FD would price its contract assuming a much higher risk.
Owning generating capacity that meets Dover’s future needs and is reliable reduces the risk in the contract, subsequently reducing the cost of the contract and putting Dover in a better position for future contracts. More importantly, owning generation capacity provides more reliability and security to our customers. Newer, additional generating capacity may provide revenues, avoid uncertainty over future capacity charges, hedge the cost of electricity, manage the risk of price volatility, and also influence the locational marginal price on the peninsula. Adding generating capacity will have its difficulties, complexities and liabilities, and likely will require capital investment. This is an opportune time to begin investigating our options. Currently, prices for generating units, such as combustion turbine units, are depressed due to high inventories and the need for capital by project developers. The possible alternatives include buying, constructing, or long-term leasing generation. The negotiating team would like to begin exploring these possibilities.
Mr. Carey moved to recommend that the City’s D/FD Contract Negotiating Team negotiate forward on the position that the City of Dover intends to replace the oldest of its 34 MW generating capacity (McKee Run Units 1 and 2) and to supply generating capacity needed for future growth, and that the team may begin exploring options for acquisition, long-term contract, or construction of needed capacity. The motion was seconded by Mr. Lambert and unanimously carried.
Update - Electric Rate Study Implementation Plan
Due to insufficient time, the above-mentioned item was deferred and will be placed on the next Utility Committee Agenda.
Mr. Carey moved for adjournment, seconded by Mr. Lambert and unanimously carried.
Meeting Adjourned at 6:55 P.M.
Respectfully submitted,
Eugene B. Ruane
Chairman
EBR/jg/lcg
S:ClerksOfficeAgendas&MinutesCommittee-Minutes200311-10-03-Special-Utility.wpd
Attachments on File at the City Clerk’s Office
Attachment #1 - Presentation of Water System Master